Bad news on the industry front spells troubled times for Adelaide as job prospects go down

Adelaide has not been in good shape for some time, and this is not expected to change much in the next couple of years.

“The Adelaide property market is likely to underperform again this year. There are few growth drivers, with fewer than 8,000 new jobs created there last year,” says Michael Yardney, CEO of Metropole Property Strategists.

The significant unemployment rate is a major issue that has been causing many residents to leave the state for greener pastures like Sydney and Melbourne. Young South Australians comprise a considerable proportion of the outgoing population, intensifying the existing brain drain issue. At the same time, dwelling values have not increased much since late 2008.

Angie Zigomanis, senior manager at BIS Oxford Economics, says net interstate migration outflow is at its highest level since the mid-1990s. Nonetheless, “the state’s excess supply is forecast to continue to expand, and this will eventually place greater downward pressure on prices”.

“South Australia already has the highest unemployment rate of the states and continues to face headwinds in a number of industry sectors, with jobs in the steel sector at risk and those in the automotive sector to decline,” Zigomanis says in BIS Oxford Economics’ Residential Property Prospects 2017 to 2020 report.

“Purchasers are expected to become more cautious.”

Affordability supports demand

The downturn has maintained Adelaide’s status as an affordable market, keeping values from dropping significantly. However, the state’s economic problems are expected to impact on the property market within the next couple of years, causing it to bottom out, and the outlook for the state is then anticipated to improve by 2020.

“Prices are expected to then stabilise and show a small increase by 2019/2020,” Zigomanis concludes.

Until then, “Adelaide will continue to suffer”, says Philippe Brach, CEO of Multifocus Properties & Finance.

“It recently had a bit of bad news with car manufacturing pulling out, and now the submarines are not going to be all built there,” he says.

With Adelaide not being a major destination for investors, rising national interest rates will not have a significant effect on property prices. However, owner-occupiers will definitely feel the sting.

“In this market, the owneroccupier ratio to investors is the usual one we’ve had for many years, which is around 70% owner-occupiers to 30% investors,” Brach explains.

“So property prices are being affected more so, I suspect, with all the owner-occupiers.”

SUBURB TO WATCH

FULLARTON: Houses rule in affluent suburb

Located in the inner south of Adelaide just 3km from the CBD, Fullarton sees steady demand for its houses. Following an increase of 1.3% in prices in the year leading up to July 2017, the median value inched closer to $800,000.

Real Estate Investar findings indicate that vacancies are quite tight in this suburb, at 1.4%.  Nonetheless, the unit market is more stagnant than the house market – apartment values slipped slightly by 0.9% over the same period.

Yet Fullarton’s location very close to the city centre should certainly make it a suburb of interest for many buyers, especially since it lies within the Glenunga International school zone.